It was produced as the first of three films, filmed simultaneously on location in New Zealand with a budget of U.S. $180 million, the most in moviemaking history, with principal photography taking 14 months and postproduction continuing long after that.

The Fellowship of the Ring makes extensive use of digital, practical and makeup special effects throughout. One noticeable effect that appears in almost every scene involves setting a proper scale so that the characters are all the proper height. Elijah Wood, who plays Frodo, is 5 ft 6 in (1.68 m) tall in real life; but the character of Frodo Baggins is barely four feet tall. Many different tricks were used to cast the hobbits (and Gimli the Dwarf) as diminutive. Large and small stunt doubles were used in certain scenes, while entire duplicates of certain sets (especially Bag End in Hobbiton) were built at two different scales, so that the characters would appear to be the appropriate size. At one point in the film Frodo runs along a corridor in Bag End, followed by Gandalf. Elijah Wood and Ian McKellen were filmed in separate versions of the same corridor, built at two different scales, and a fast camera pan conceals the edit between the two. Forced perspective was also employed, so that it would look as though the short hobbits were interacting with taller Men and Elves. Surprising the makers of the film, kneeling was used to great effect.

For the battle between the Last Alliance and the forces of Sauron that begins the film, an elaborate CGI animation system, called Massive, was developed that would allow thousands of individual animated "characters" in the program to act differently. This helped give the illusion of realism to the battle sequences.

Jackson, Walsh and Boyens made numerous changes to the story, for purposes of pacing and character development. Jackson said his main desire was to make a film focused primarily on Frodo and the Ring, the "backbone" of the story. The prologue condenses Tolkien's backstory, in which The Last Alliance's seven-year siege of the Barad-dûr is a single battle, where Sauron is shown to explode, though Tolkien only said his spirit flees.

Events at the beginning of the film are condensed or omitted altogether. In the book the time between Gandalf leaving the Ring to Frodo and returning to reveal its inscription, which is 17 years, is compressed for timing reasons. Frodo also spends a few months preparing to move to Buckland, on the eastern border of the shire. This move is omitted and combined with him setting out for Bree. Also compressed is the time between Frodo and Sam leaving Bag End and their meeting Merry and Pippin. Characters such as Tom Bombadil are left out to simplify the plot and increase the threat of the Ringwraiths. Such sequences are left out to make time to introduce Saruman, who in the book doesn't appear until Gandalf's account at the Council of Elrond. Saruman's role is enhanced: he is to blame for the blizzard on Caradhras, a role taken from Sauron and/or Caradhras itself in the book. Gandalf's capture by Saruman is also expanded with a fight sequence.

The events at Weathertop were also altered. The location of the fight against the Ringwraiths was changed to the ruins on top of the hill rather than a campsite at its base. When Frodo was stabbed in the book, the party spent two weeks travelling to Rivendell, but in the film this is shortened to less than a week, with Frodo's condition worsening at a commensurately greater rate. Arwen was given a greater role in the film, accompanying Frodo all the way to Rivendell, while in the book Frodo faced the Ringwraiths alone at the Ford of Bruinen. The character of Glorfindel was omitted entirely and his scenes were also given to Arwen. She was tacitly credited with the river rising against the Ringwraiths, which was the work of her father Elrond with aid from Gandalf in the book.

A significant new addition is Aragorn's self-doubt, which causes him to hesitate to claim the kingship of Gondor. This element is not present in the book, where Aragorn intends to claim the throne at an appropriate time. In the book Narsil is reforged immediately when he joins the Fellowship, but this event is held over until The Return of the King in film to symbolically coincide with his acceptance of his title. These elements were added because Peter Jackson believed that each character should be forced to grow or change over the course of the story.

Elrond's character gained an adversarial edge; he expresses doubts in the strength of Men to resist Sauron's evil after Isildur's failure to destroy the ring as depicted in the prologue. Jackson also shortens the Council of Elrond by spreading its exposition into earlier parts of the film. Elrond's counsellor, Erestor — who suggested the Ring be given to Tom Bombadil — was completely absent from this scene. Gimli's father, Glóin, was also deemed unnecessary.

The tone of the Moria sequence was altered. Although in the book the Fellowship only realises the Dwarves are all dead once they reach Balin's tomb, the filmmakers chose to use foreshadowing devices instead. Gandalf says to Gimli he would prefer not to enter Moria, and Saruman is shown to be aware of Gandalf's reticence, and also reveals an illustration of the Balrog in one of his books. The corpses of the dwarves are instantly shown as the Fellowship enter Moria.

In terms of dramatic structure, the book simply ends; there is no climax, because Tolkien wrote the "trilogy" as a single story published in three volumes. Jackson's version incorporates the first chapter of The Two Towers and makes its events, told in real time instead of flashback, simultaneous with the Breaking of the Fellowship. This finale is played as a climactic battle, into which he introduces the Uruk-hai referred to as Lurtz in the script. In the book, Boromir is unable to tell Aragorn which hobbits were kidnapped by the orcs before he dies. From there, Aragorn deduces Frodo's intentions when he notices that a boat is missing and Sam's pack is gone. In the film, Aragorn and Frodo have a scene together in which Frodo's intentions are explicitly stated.

Some fans also felt that movie producers missed the linguistic basis of the work (as Tolkien invented the world to bring his languages alive and not the other way around):

In particular, Namárië, Galadriel's lament in Lothlórien that begins "Ai! laurië lantar lassi súrinen", did not appear in the film, although Tolkien considered it one of the highest points of The Fellowship of the Ring. A few lines of the poem do, however, make it into the soundtrack at the departure from Lothórien. Other samples of Elvish language from the books are treated similiarly. However, Elvish (most often Sindarin) is spoken extensively in the film, with and without subtitles. The Elvish lines were, for the most part, devised specifically for the film version, sometimes based on English text written by Tolkien.

The movie features numerous books and artifacts with Tengwar inscriptions. Even though they were researched for accuracy, they still show a couple of peculiarities and inconsistencies not found in Tolkien's own Tengwar samples.

Another idiosyncrasy of the films is that Hobbit writing is shown in the Latin alphabet, while the books state that the Hobbits used the Tengwar. However, the Latin calligraphy is written in such a way that it bears resemblance to the Tengwar, including tehtar above their corresponding vowels. This refers visually to the Tengwar while allowing the audience to immediately recognise the text.

In 2002 the movie won four Academy Awards out of thirteen nominations. The winning categories were for Best Cinematography, Best Effects, Visual Effects, Best Makeup and Best Music, Original Score. The other nominated categories were Best Actor in a Supporting Role (Ian McKellen), Best Art Direction-Set Decoration, Best Costume Design, Best Director, Best Editing, Best Music, Song (Enya, Nicky Ryan and Roma Ryan for "May It Be"), Best Picture, Best Sound and Best Writing, Screenplay Based on Material Previously Produced or Published.

After the close of its theatre run, it ranked in the top ten highest grossing movies worldwide, with takings of $860,700,000 USA dollars from world-wide theatrical box office receipts (movie ticket sales).
(Source: IMDB Top Movies Chart).

The movie has also been released on videotape and DVD, with some editions having additional footage and commentary not included in the theatrical release edition. Notable among the restored scenes is additional footage of a smiling Galadriel bestowing gifts on the members of the fellowship. In the theatrical version, she appeared dark and brooding. On Tuesday, November 12, 2002, Special Extended DVD Edition of The Lord of the Rings: The Fellowship of the Ring was released, containing 208 minutes (3 hours, 28 minutes) of footage.

The extended editions of The Fellowship of the Ring and the second movie, The Two Towers had limited theatrical runs in selected cities worldwide in late 2003, during the run-up to the release of the final film, The Return of the King.